Posts with tag: landlords

Retirees still investing in buy-to-let

Published On: February 23, 2016 at 10:10 am

Tags: Buy-to-Let,landlords,rental market,retiree landlords

A new assessment on buy-to-let investment has revealed that retirees are still looking to purchase in the sector.

Data from a report by Fidelity International indicates that retirees putting tax free cash from their pensions into buy-to-let has remained constant during the last year. This is despite the forthcoming tax changes.

Alterations

On April 6^th 2016, a buy-to-let investor will be permitted to pay an extra 3% stamp duty in comparison to residential buyers. In addition, higher-rate tax relief on mortgage interest will be cut from April 2017, to the basic rate of 20%. As such, landlords will be able to claim less for wear and tear suffered in their properties.

However, these changes have done little to dispel retirees’ appetite for buy-to-let investment. Fidelity International said that 7% of their retirement customers used their tax-free money to invest in a rental property during January. This was the same proportion seen in the last six months of 2015.

In all, property purchases remain popular with retirees, making up 14% of all usages of tax-free pension money during 2015. This percentage has typically been split 50/50 between buy-to-let and owner-occupier purchases.

Retirees still investing in buy-to-let

‘No Brainer’

‘The British love affair with all things property is well-documented and for many retirees, buy-to-let is seen as a no brainer investment given the spectacular rise in property markets, particularly in London, over recent years,’ noted Maike Currie, investment director for personal investing at Fidelity International. ‘Tax changes aside, the illiquidity of the housing market as well as costs in the way of maintenance, stamp duty, mortgage arrangement fees and a host of unpredictable outgoings can chip away at income. Not to mention the time and effort required to manage a property and the risk that it may lie empty between tenancies,’ she continued.[1]

‘Investing in property funds allows investors access to an income stream without the hard work and unexpected costs of a tangible property. Buy-to-let in retirement may work for some but with the added extras that come with it, it’s worth asking yourself whether you really want to be managing a property in your eighties?’ Currie concluded.[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/retirees-love-affair-with-buy-to-let-continues

Tenants staying in PRS for longer

Published On: February 22, 2016 at 11:33 am

Author: Em Morley

Categories: Property News

Tags: English Housing Survey,landlords,rental market,renters,tenants

Latest government figures suggest that private rental sector tenancies are getting longer.

Additionally, data from the report shows that the typical length of residence in a family-sized rental unit is increasing.

Rises

The English Housing Survey 2014/15 shows that in the last 10 years, the proportion of privately rented homes with dependent children has risen from 30% in 2004-05, to 37% in 2014/15.

In addition, the average length of private sector residencies rose to 4 years, from 3.5 one year ago. The survey also found that tenants living in privately rented accommodation for a greater length of time generally paid less.

Tenants staying in PRS for longer

Break down barriers

As a result, the RLA has called on the Government to break down barriers that prevent longer-term tenancies. These include restrictions imposed on landlords by lenders

RLA chairman Alan Ward, believes, ‘more can be done to help landlords offer longer term tenancies without the need for compulsory three or five tenancies. We are calling on the Government to use the Housing and Planning Bill to remove barriers preventing landlords from offering longer tenancies, including mortgage and leasehold conditions that may prevent this.’[1]

‘Notable increases in the average length of time tenants stay in a private rented property show the system already enables longer tenancies that so many are calling for. Landlords are already meeting tenants’ requirements and there is no need for heavy-handed legislation that would disrupt supply of badly-needed accommodation,’ Ward went on to say.[1]

[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/2/private-rental-sector-tenancies-for-families-are-getting-longer

Landlords told to wait to replace furniture

Published On: February 21, 2016 at 10:10 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlords,rental market,tenants,wear and tear allowance

Landlords are being advised to wait until the 6^th April to replace any furniture in their property.

Accountants Blick Rothenberg LLP are guiding landlords to wait until after this date, when the 10% wear and tear allowance is replaced. These costs will then become deductible under a new relief.

Changes

Robert Pullen, personal tax manager at Blick Rothenberg noted: ‘from April 6 2016, the favorable 10% wear and tear allowance for fully furnished residential properties will no longer be available.’[1]

‘Instead, only the actual costs incurred in replacing furniture, furnishings, appliances and kitchenware provided for the tenants’ use will be deductible. Initial costs are not allowed, only the replacement of such items. The Government expects this measure will bring in around £165 million/year from 2017 onwards,’ he continued.[1]

Pullen went on to say that, ‘this is a significant step away from the wear and tear allowance, bringing the position more in line with general deductibility of repair costs or replacing toilets, boilers etc. Landlords of fully furnished properties will feel this change adds additional complexity to an increasingly complicated area of deductible costs, following closely on the heels of the restriction to finance cost expenditure.’[1]

Landlords told to wait to replace furniture

Relief

Mr Pullen sees the changes as good news for landlords owning part or unfurnished homes, who will now be able to claim the new relief. At present, landlords do not generally receive much relief for associated costs after changes brought in from April 2014.

HMRC have pledged to provide ‘comprehensive guidance’ on the more complicated areas of whether a replacement is considered an improvement or not. Where the furniture is replaced to a modern equivalent, the improvement as a result of technological advances should be ignored, so that the cost is allowed in full.

However, qualifying furnished holiday lets and commercial buildings are not covered by these rules. As such, relief on the initial cost of items, as a well as replacements, remain allowed.

[1] https://www.landlordtoday.co.uk/breaking-news/2016/2/landlords-advised-to-wait-until-april-to-replace-furniture

40% of landlords considering forming a ltd company

Published On: February 20, 2016 at 9:05 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlords,ltd company,NLA,Stamp Duty,tax

Over 40% of landlords are looking into making their business a ltd company, according to new research from the National Landlords Association (NLA.)

Presently, just only 1% of respondents said that they had already chosen to incorporate. The NLA believe this is due to the high cost of transferring personally held property into a private limited company.

Intentions

Additionally, data shows 31% of landlords have no intention of switching their properties to a limited company. 29% are still not sure about what they are going to choose in regards to incorporation.

Mortgage interest relief for buy-to-let landlords is to be levelled at the basic rate of income tax (20%) by 2021 and will begin to be phased back from April 2017. Landlords then will no longer be able to remove the cost of mortgage interest before they declare their taxable profit. The new moves will see them receive a tax credit of 20% of their mortgage interest costs.

The NLA has called the alterations, ‘The Turnover Tax,’ as landlords’ tax will be worked out on the rental income they earn instead of any profits. and will drive many basic rate payers up into a higher tax bracket. Higher rate payers will be left with increased bills.

40% of landlords considering forming a ltd company

Transferring

Landlords structured as private limited companies will be exempt from the tax alterations. Instead, they will only pay corporation tax on their profits.

‘Transferring personally held property to a limited company isn’t a straightforward process, so it’s not surprising that so few have taken this action so far,’ noted Richard Lambert, Chief Executive Officer at the NLA. ‘Landlords need to do their research but many will realise that incorporating simply doesn’t stack up financially; doing so will incur capital gains and potential stamp duty charges, which means the process may be prohibitively expensive.’[1]

Richard Price, Executive Director of the UK Association of Letting Agents, also noted, ‘while just one per cent have incorporated so far a significant proportion are still considering the move. If landlords follow through with these intentions then it’s likely that more and more will take a hands-on approach to managing their portfolios in the future, which would mean less business to go around for agents and certainly less of a need for full service offerings.’[1]

‘The changes to taxation are forcing landlords to re-evaluate their business and their place in the market, so our advice for agents is to begin talking to your clients about their intentions over the next few years and consider how you’ll meet their changing needs in a way that is distinct from your rivals,’ Price concluded.[1]

[1] http://www.propertyreporter.co.uk/landlords/incorporating-doesnt-stack-up-for-majority-of-landlords.html

Buy-to-Let returns highest for 14 months

Published On: February 19, 2016 at 12:39 pm

Author: Em Morley

Categories: Finance News

Tags: Buy-to-Let,buy-to-let returns,landlords,letting agents,Stamp Duty

The most recent Buy-To-Let Index from Your Move and Reeds Rains has indicated that returns from buy-to-let property are soaring.

Data from the report shows that returns currently stand at their highest level since November 2014.

Growth

Looking into both rental income and capital growth, the average landlord in England and Wales has seen total returns of 12% in the year to January. This is a rise from the 11.2% recorded in the twelve months to December and represents a fourteen month high. In November 2014, returns stood at 12.3%.

In absolute terms, this means that the typical landlord in England and Wales has seen a return of £21,988 in the last year, before any deductions such as mortgage payments.

Of this, the average capital gain totalled £13,594, with rental income making up £8,394 over the same period.

Rental yields have proven to be sturdy when faced by price increases. The gross yield on a rental property in England and Wales remains steady at 4.9% in January, as it was in December 2015. Annually, this was slightly less than the 5.0% seen in January 2015.

‘Picking up’

‘Buy-to-let returns are building and property prices are picking up-as the housing shortage across the UK intensifies,’ observes Adrian Gill, director of estate agents Reeds Rains and Your Move. ‘Landlords’ balance sheets are looking healthier than at any point since 2014 and property investors are looking at an excellent rate of return from their portfolios. With house prices rising rapidly into the New Year, this acceleration will be a welcome addition to the wealth of landlords on paper, while solid rental yields are underpinning total returns pushing well into the double digits.’[1]

Buy-to-Let returns highest for 14 months

‘Stamp duty premiums on new buy-to-let purchases are the rhino in the room-everyone is talking about the 1^st April deadline and the extra purchase costs are perceived by some commentators as potentially hazardous. But this is a little simplistic. Landlords are long-term investors and generally take good advice before making a new purchase, while the real changes will come when some landlords see gradual changes to their tax relief on mortgage interest. The rules around UK property are changing-but there is no bull in the buy-to-let china shop,’ he continued.[1]

Shifts

Mr Gill believes that, ‘in 2016, the big shift is likely to be in favour of existing landlords, potentially at the expense of those planning to start up as a landlord for the first time or expand their portfolio.’ He said that as a result, ‘it will be interesting to see how the rental market responds if there is a disruption to investment in supply.’[1]

Concluding, Gill said that, ‘this is likely to be a short-term effect. Over the longer term there is a consistent and developing lack of housing across all tenures, for a spiralling population. Owners and renters alike will see the cost of somewhere to live continue to rise, whether expressed in rents or prices. Stamp duty surcharges could funnel more money from the industry to the Treasury, but ultimately will not change the level of demand from tenants

[1] http://www.propertyreporter.co.uk/landlords/best-buy-to-let-returns-since-2014.html

The Court Case That Could Weaken Right To Rent

Published On: February 18, 2016 at 11:30 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,landlords,letting agents,Right to Rent,RyanAir

A recent court case ruling could affect the way that landlords and letting agents are penalised under the Right to Rent scheme.

Since 1^st February, landlords or their letting agents have been obliged to conduct immigration checks on all prospective tenants.

However, the court case in question did not involve landlords or letting agents – it regarded the budget airline Ryanair. The outcome of the case suggests that the Government may be open to legal challenges from landlords or agents under the private rental sector Right to Rent scheme.

The Home Office has claimed that it will not penalise a landlord or agent that has been caught out by well-forged documents.

In the case, Ryanair was appealing against Home Office fines imposed for carrying two illegal immigrants into the UK.

Judge Damien Lochrane noted that even trained immigration officers find it difficult to spot forgeries.

He ruled that Ryanair should not have been fined for flying the Albanian couple from Majorca to Edinburgh in May 2015.

The pair had already passed through checks by Spanish border police and Ryanair, before UK border control officers at Edinburgh airport picked up their false documents.

The judge insisted that the way the regime for airlines to check passports is operated by the Home Office “offends the basic concepts of justice and indeed rule of law”¹.

The Court Case That Could Weaken Right To Rent

He added that airline staff could not be expected to spot well-forged documents that even trained immigration officers could not detect.

The Policy Director at the Residential Landlords Association (RLA), David Smith, points out the ruling is not binding on other courts.

However, he says the case does raise the prospect that under Right to Rent, a landlord or agent that has been tricked by a well-forged document could be successful in an appeal against any action taken against them by the Home Office.

The Government has previously stated that it will not go after landlords and agents that have been duped by false documentation, but it has not been clear on the details.

It has emphasised that it will target landlords and letting agents that fail to conduct checks and who are persistent offenders.

The Ryanair ruling arrives as the new Immigration Bill makes its way through Parliament. If passed, it will introduce criminal penalties for landlords and agents that do not carry out Right to Rent checks.

Smith states: “This court ruling vindicates what we have been saying all along, that landlords cannot and should not be expected to act as border police or to detect forgeries that trained and experienced airline staff and immigration officers might miss.

“In light of this case, and to save the Government money from losing similar actions brought by landlords, we call on the Government to provide better information to landlords about document forgeries and to offer more clarity as to the legal responsibility of landlords and agents duped by forged identity documents.”¹

¹https://www.lettingagenttoday.co.uk/breaking-news/2016/2/industry-body-says-court-case-may-weaken-right-to-rent-enforcement